Hugh Love (Letters, 4 December) is right to raise the problematic issue of VAT and its effect on affordability in private finance initiative schemes.

While in no way minimising the problem, there is a risk surely in this case of the tail wagging the dog. It must be right to consider including clinical services in PFI schemes, as the Institute of Health Services Management has advocated, because in certain cases they will allow a better deal to be struck. We therefore stick by our advice to ministers. We will be examining the implications of VAT as part of our PFI Watch programme for 1998, and would welcome further views from the field on this subject.

Richard Meara,

Co-ordinator,

IHSM PFI Watch.